GM Exits Bankruptcy, Promising "An End to Business As Usual"

Fritz Henderson, CEO of GM, held a news conference at 9:00 AM EST, and outlined the "new" GM. A massive number of white collar jobs will be eliminated and Henderson declared an end to the business as usual paradigm. We shall see whether or not GM is to be believed.

From The Wall Street Journal:

The new General Motors exited bankruptcy protection early Friday after its faster-than-expected stint in court, pledging to "get back to the business of building great cars and trucks" and better serving customers.

he auto maker completed the split of good and bad assets that will see General Motors Co. emerge as the operating entity, a slimmed-down company mostly owned by the U.S. government with a much-reduced debt burden and fewer brands.

Mr. Henderson on Friday unveiled sweeping management changes and pledged to repay loans from the U.S. government "much sooner" than 2015

"Business as usual is over at General Motors," Chief Executive Fritz Henderson said at a press conference at GM's downtown Detroit headquarters, emphasizing the redoubled focus on listening to customers and on making faster decisions at the corporate level.

The company's new Chairman, former AT&T Corp. chief Edward Whitacre, said, "We all want to win, we are going to win."

GM's exit marks a surprisingly quick end to one of the largest industrial U.S. bankruptcies. GM, battered by a sharp decline in sales and high cost structure, received billions of dollars of government aid before filing for bankruptcy protection on June 1.

The new GM will be dramatically smaller, leaner and less encumbered by debt than the 100-year-old auto giant being left behind. As part of the sale, GM's toxic assets will be left behind as a separate company to be liquidated in a sale expected to last several years.

The revamped GM is eliminating much of its regional structure and realigning sales and marketing functions.

Nick Reilly, current head of GM Asia, will oversee all international operations from the unit's base in Shanghai. More than half of group sales come from outside North America.

Regional presidents are being eliminated. Mr. Henderson didn't comment on what role North American chief Troy Clark might assume, but noted 35% of its executive ranks are being cut, with an emphasis on senior staff.

GM also confirmed that Robert Lutz, who had been slated to retire at the end of this year, has decided to join the new GM as vice chairman responsible for all creative elements of new products and customer relationships. With the 77-year-old Mr. Lutz staying on, there would also be a realignment of the North American sales function, now headed by Mark LaNeve.

In an email Friday, Mr. Lutz said the move will allow him to focus more intently on his roots in the auto business. Although educated with a focus on marketing, he had been overseeing GM's efforts in product development since 2001.

"It's the other half of the business that I didn't have before, and I found that somewhat frustrating," Mr. Lutz said. "My entire academic and professional background is in marketing; I was practicing without a license in product development."

Mr. Henderson said GM's ability to repay U.S. government in full rested on its performance, but pledged to make repayments "much sooner" than the existing 2015 schedule.

Earlier this year, the auto maker had said a bankruptcy process would take months, if not years. The U.S. government, keeping GM afloat since December with billions in federal funds, will be majority owner of the newly restructured company, with a 60.8% stake. The Canadian federal government, Ontario provincial government, the United Auto Workers and bondholders in the old GM will hold the remaining stake.

Though the new GM will not be a publicly traded company initially, Mr. Henderson stressed that GM will remain transparent in its financial reporting.

"We expect to take the company public again as soon as practical, starting next year, and to repay our government loans as soon as possible," he said. "We are required to pay off the loans by 2015, but our goal is to pay them much sooner." The government has committed $50 billion in funds to GM.

The restructuring is expected to wipe out nearly 70% of GM's crushing debt load. GM entered Chapter 11 with $176 billion in liabilities to retirees, warranties and a legion of lenders including the U.S. government. A bankruptcy judge said Wednesday the company will exit with $48 billion in debt.

GM's U.S. work force will shrink dramatically as well, to about 64,000 employees by the end of 2009 from 91,000 heading into the year. Also going away are four of GM's eight U.S. brands, nearly one-third of its nameplates and hundreds of dealerships.

Some critics have described GM's product line-up as uncompetitive in some segments. Mr. Henderson said the company would launch 10 new products in the U.S. over the next 18 months, as well another 17 overseas. After trimming its dealer network, GM is also testing a new online auction buying system with eBay Inc.

Mr. Henderson said Friday that "true customer service" represented a "new frontier" for the industry.

Hourly labor costs, including obligations to active and retired workers, also will drop, from $6.4 billion in 2008 to between $4 billion and $5 billion annually over the next several years. By 2014, GM estimates its hourly costs at $4.1 billion, a two-thirds reduction from 2006.

GM is counting on the reductions to stem losses despite depressed auto sales. The auto maker estimates its post-bankruptcy break-even point will fall to 10 million annual U.S. vehicle sales, down from 12.5 to 13 million. The U.S. annualized selling rate has come in below 10 million for much of 2009.

GM will also end its regional operating structure, eliminating its regional president positions, as part of a broader effort to remove layers of management and to speed decision-making. In total, GM will reduce the number of U.S. executives by 35% by the end of this year. Overall salaried employment will decline by 20%.

Mr. Henderson said more details on the new structure and leadership moves will come later this month.

General Motors to Keep GMC and Pontiac

GM CEO, Fritz Henderson




GM disputed the claims from the previous post, going on record as saying both GMC and Pontiac will remain. Look for updates today as CEO Fritz Henderson holds a press conference to delineate further plans.

From Automotive News:

A senior General Motors executive today denied reports that President Barack Obama's automotive task force has pressured the automaker to dump GMC and Pontiac.

Company sales chief Mark LaNeve also denied rumors that GM plans to terminate the franchise agreements of poorly performing dealers before June 1 to accelerate its dealership consolidation campaign.

"The strategy we laid out for you [in February] is still the strategy," LaNeve, GM's vice president of vehicle sales, service and marketing, said today in an interview with Automotive News.

"Are we working it, tweaking it, examining every aspect of it? Yes, but nothing has changed with our strategy," he said. Reports that "GMC is going away are just unfounded, unsubstantiated and untrue," LaNeve said.

In a Feb. 17 report to the U.S. Treasury Department, GM said it planned to go to market with four core brands: Chevrolet, Cadillac, Buick and GMC. Pontiac would remain as a much smaller brand. GM is trying to sell Hummer, Saab and Saturn.

And that is still the plan, LaNeve said. "They're not pressuring us to give up on anything," he said. "Buick and GMC are very profitable brands, and we have plans to make them even more profitable."

Targeting metro markets LaNeve confirmed that GM will target metro markets to consolidate dealerships, but the company does not have a June 1 timetable to do so. As part of its consolidation effort, GM will consider such criteria as operator's effectiveness, location and working capital when it targets those stores for closure. Meanwhile, GM's new CEO Fritz Henderson has scheduled a conference call with journalists tomorrow at 10:15 a.m. to update the company's restructuring plans. "We anticipate that this will be the first of a series of updates designed to provide perspective on GM's situation, decisions and actions," according to a statement released by GM.

New GM CEO, Fritz Henderson, States Bankruptcy May Become More Probable

Fritz Henderson - Newly Appointed GM CEO







In Fritz's second day on the job, he held a press conference and told the media that bankruptcy is "more probable" as GM works to meet the new requirements for government aid. What is maddening is the fact that we have already given GM billions in aid and now they may declare bankruptcy anyway? Not only that, but the Obama administration just announced that the government will back all the warranty repairs on vehicles if GM or Chrysler does not survive. What an expensive and messy proposition this auto bailout has become.

From Yahoo News:

General Motors Corp.'s new chief executive said Tuesday that more of the automaker's plants could close and bankruptcy is "more probable" as GM works to meet new, tougher requirements for government aid.

In his first news conference as CEO, Fritz Henderson said he expects the company would "need to take further measures" beyond the five plants the company said it would shutter when it submitted a restructuring plan to the government last month.

GM also is likely to offer another buyout program to workers as it looks to cut labor costs, Henderson said.

President Barack Obama said Monday that GM's initial plans to become viable didn't go far enough. He gave the company 60 days to make more cuts and get more concessions from bondholders and unions or it won't get any more government help.

The Obama administration also asked former CEO Rick Wagoner to resign, and Henderson took over as CEO on Monday.

Henderson said that although GM would prefer not to use bankruptcy protection to save itself, it is "certainly more probable" than in the past.

The company, he said, has until June 1 to accomplish changes sought by the government, or it will be in bankruptcy. The 60-day deadline should be enough time, but if it becomes evident that the changes can't be made by the deadline, GM could go into court sooner, he said.

"It doesn't have to take 60 days. If it's quite clear that we're not able to accomplish what we need to do in terms of operational restructuring, reduction of debt on the balance sheet and what we need to do to accomplish these broad parameters of having a viable business, this will be a management judgment" reviewed by the Obama administration's autos task force, he said.

Henderson also said GM is still talking with potential buyers of the Hummer brand, and a decision on the brand's fate will come in the next few weeks. GM said in a viability plan filed with the government in February that it would make the decision in the first quarter, which ends Tuesday.

In an effort to increase sales, GM launched a program called "Total Confidence" that will make car payments for customers who lose their jobs through no fault of their own.

GM will make up to nine payments of $500 each to qualifying customers. Consumers must qualify for state unemployment benefits to be eligible for the program.

The program starts Wednesday and runs until April 30.

Ford Motor Co. announced a similar program Tuesday, which will take over customer's payment of up to $700 a month for a year in the event of job loss.

Shares of GM fell 32 cents, or 11.9 percent, to $2.38 in midday trading. Ford shares fell 6 cents, or 2.2 percent, to $2.70.

GM CEO Rick Wagner Steps Down, Replaced By Fritz Henderson

General Motors and Chrysler LLC will each be given capital and time to accelerate their attempts to restructure and survive, according to a government aid plan set for release today.

GM also confirmed earlier reports that Rick Wagoner has stepped down at the request of the administration. He will be succeeded as CEO by COO Fritz Henderson. Board member Kent Kresa, chairman emeritus of Northrop Grumman Corp., will be interim non-executive chairman of the GM board.

A government official, who asked not to be identified because the plan would not be announced by President Barack Obama until today, said GM will be given 60 days to determine the best path forward.

Chrysler will be given 30 days to complete a proposed alliance with Italy's Fiat SpA. If the deal is successful, the government could extend up to $6 billion in new assistance.

The official did not say how much capital each company would receive over the next several weeks, and did not indicate what long-term financing GM might receive if it shows that a turnaround plan can be successful. Chrysler has said it needs additional funding as soon as Tuesday to avoid a cash crisis. GM has previously said it needs more than $2 billion for April. GM has asked for more than $16 billion in new government loans, while Chrysler wants $5 billion to ride out the weakest U.S. market for new cars in almost 30 years. Ford, which is also struggling, is not seeking federal help. Wagoner was the second car executive to lose his job on Sunday. The board of France's PSA Peugeot Citroen fired CEO Christian Streiff and replaced him with Philippe Varin, who will take up the position on June 1. Peugeot last month posted a $460 million net loss and said it expected to stay in the red until 2010. "Mr. Wagoner has been asked to resign as a political offering despite his having led GM's painful restructuring to date," said U.S. Rep. Thaddeus McCotter, a Michigan Republican and member of the House Financial Services Committee. Said Rebecca Lindland, director of IHS Global Insight: "We had feared the Obama administration may force some of the executives out. But we don't really see how this would make GM the better, stronger company that Obama wants it to be." John Casesa, a managing partner at New York-based consulting firm Casesa Shapiro Group said: "GM lost its footing in the late 1970s and the board didn't seem to notice for another 20 years. Rick made a lot of decisions, but they came too late," GM and Chrysler have run through most of the initial rescue money and are at risk of bankruptcy without immediate help. The government has said it does not want to push GM or Chrysler into bankruptcy, although some analysts believe that is the only way to truly restructure the companies. Wagoner had been outspoken in his opposition to a Chapter 11 reorganization, saying it would drive away consumers and probably lead to GM's liquidation. But neither automaker has finished the cost-cutting overhaul dictated by the terms of their December bailout launched by the Bush administration that set a March 31 deadline for determining whether the companies can be saved.

Source: Automotive News